About Patrick Industries

Patrick Industries, Inc. (Patrick) operates as a component solutions provider for the recreational vehicle (RV), marine, manufactured housing (MH) and various industrial markets, including single and multi-family housing, hospitality, institutional and commercial markets. The company operated through a nationwide network that included, as of December 31, 2022, 185 manufacturing plants and 67 warehouse and distribution facilities located in 23 states, with a small presence in Mexico, China, and Canada. Segments The company operates within two segments, Manufacturing and Distribution, through a nationwide network of manufacturing and distribution centers for its products, thereby reducing in-transit delivery time and cost to the regional manufacturing footprint of its customers. The Manufacturing and Distribution segments accounted for 74% and 26%, respectively, of the company’s consolidated net sales for 2022. The company’s capital allocation strategy is to optimally manage and utilize its resources and leverage its platform of operating brands to continue to grow, reinvest in its business, and return capital to shareholders. Through strategic acquisitions, expansion both geographically and into new product lines and investment in infrastructure and capital expenditures, Patrick seeks to ensure that its operating network contains capacity, technology and innovative thought processes to support anticipated growth needs, effectively respond to changes in market conditions, inventory and sales levels, and successfully integrate manufacturing, distribution and administrative functions. Over the last three years, the company has executed on a number of new product initiatives and completed acquisitions that directly complement its core competencies and existing products, expand its presence in its primary end markets, and position it to enter new end markets. Major Product Lines Patrick manufactures and distributes a variety of products within its reportable segments, including: Manufacturing: Includes laminated products for furniture, shelving, walls and countertops; decorative vinyl, wrapped vinyl, paper laminated panels and vinyl printing; solid surface, granite and quartz countertops; fabricated aluminum products; wrapped vinyl, paper and hardwood profile mouldings; electrical systems components including instrument and dash panels; slide-out trim and fascia; cabinet products, doors, components and custom cabinetry; hardwood furniture; fiberglass bath fixtures and tile systems; specialty bath and closet building products; boat towers, tops, trailers, and frames; softwoods lumber; interior passage doors; wiring and wire harnesses; CNC molds and composite parts; aluminum and plastic fuel tanks; slotwall panels and components; RV painting; thermoformed shower surrounds; fiberglass and plastic components, including front and rear caps and marine helms; polymer-based and other flooring; air handling products; marine hardware and accessories; treated, untreated and laminated plywood; RV and marine furniture; adhesives and sealants; audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers; marine non-slip foam flooring, padding, and accessories; protective covers for boats, RVs, aircraft, and military and industrial equipment; and other miscellaneous products. Distribution: Includes pre-finished wall and ceiling panels; drywall and drywall finishing products; interior and exterior lighting products; wiring, electrical and plumbing products; transportation and logistics services; electronics and audio systems components; cement siding; raw and processed lumber; fiber reinforced polyester (FRP) products; interior passage doors; roofing products; laminate and ceramic flooring; shower doors; fireplaces and surrounds; appliances; tile; marine hardware and accessories; and other miscellaneous products. Primary Markets Patrick manufactures and distributes its products for four primary end markets. The company’s operating facilities generally are strategically located in proximity to the customers they serve. Recreational Vehicles The company’s RV products are sold primarily to major manufacturers of RVs, smaller original equipment manufacturers (OEMs), and to a lesser extent, manufacturers in adjacent industries. The principal types of recreational vehicles include towables: conventional travel trailers, fifth wheels, folding camping trailers, and truck campers; and motorized: class A (large motor homes), class B (van campers), and class C (small-to-mid size motor homes). The RV market is primarily dominated by Thor Industries, Inc. (Thor), Forest River, Inc. (Forest River) and Winnebago Industries, Inc. (Winnebago), which combined held approximately 87% of retail market share for towables and 86% for motorized units for 2022 as reported per Statistical Surveys, Inc. (SSI). The company estimates that its mix of RV revenues related to towable units and motorized units is consistent with the overall RV industry production mix. In 2022, according to the RVIA, towable and motorized unit shipments represented approximately 88% and 12%, respectively, of total RV industry wholesale shipments with wholesale unit shipments decreasing 20% in the towable sector and increasing 4% in the motorized sector in 2022 compared to the prior year. Recreational vehicle purchases are generally consumer discretionary income purchases, and therefore, any situation which causes concerns related to discretionary income may have a negative impact on the RV market. Marine The marine market reflects the active, outdoor leisure-based, family-oriented lifestyle, similar to the company’s RV end market, and it has increased its focus and expanded its presence in this market through recent acquisitions, particularly within the last three years. The company’s sales to the marine industry are primarily focused on the powerboat sector of the market, which consists of four main categories: fiberglass, aluminum fishing, pontoon and ski & wake. Manufactured Housing (MH) The company’s manufactured housing products are sold primarily to major manufacturers of manufactured homes, other OEMs, and to a lesser extent, manufacturers in adjacent industries. In the aggregate, the top three manufacturers produced approximately 75% of MH market retail unit shipments in 2022 per SSI. Industrial Markets There is a direct correlation between the demand for the company’s products and new residential housing construction and existing home remodeling activities. Patrick's sales to the industrial market generally lag new housing starts by four to six months as the company’s industrial products are generally among the last components installed into new unit construction and will vary based on differences in regional economic prospects. Many of Patrick's core manufacturing products are also utilized in the kitchen cabinet, high-rise, office and household furniture, hospitality, and fixtures and commercial furnishings markets. These markets are generally categorized by a more performance-than-price driven customer base and provide an opportunity for the company to diversify its customer base. Marketing and Distribution As of December 31, 2022, the company had approximately 4,500 active customers. Its revenues from the RV market include sales to two major manufacturers of RVs that each account for over 10% of its net sales, Forest River and Thor. Both Forest River and Thor have multiple businesses and brands that operate independently under the parent company and these multiple businesses and brands generally purchase its products independently from one another. The company’s sales to the various businesses of Forest River and Thor, on a combined basis, accounted for 38%, 42% and 39% of its consolidated net sales, for the year ended December 31, 2022. The company generally maintains supplies of various commodity products in its warehouses to ensure that it has product on hand at all times for its distribution customers. The company purchases a majority of its distribution segment products in railcar, container, or truckload quantities, which are warehoused prior to their sale to customers. Approximately 9% of the company's distribution segment’s sales were from products shipped directly from the suppliers to Patrick customers in 2022. Typically, there is a two to four-week period between Patrick receiving a purchase order and the delivery of products to its warehouses or customers and, as a result, the company has no material backlog of orders. Seasonality Accordingly, the company’s sales and profits had generally been the highest in the second quarter and lowest in the fourth quarter (year ended December 31, 2022). The company sells its components, as well as fluctuations in RV and marine dealer inventories, increased volatility in demand from RV and marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments. Regulation and Environmental Quality The company is certified to sell Forestry Stewardship Council (FSC) materials to its customers at certain of its manufacturing branches. The FSC certification provides a link between responsible production and consumption of materials from the world’s forests and assists the company’s customers in making socially and environmentally responsible buying decisions on the products they purchase. Upholstered products and mattresses provided by the company for RVs must comply with Federal Motor Vehicle Safety Standards regulated by the National Highway Traffic Safety Administration regarding flammability. For example, the company has historically received benefits from duty-free imports on certain products from certain countries pursuant to the U.S. Generalized System of Preferences (GSP) program. Additionally, the company is subject to government regulations relating to importation activities, including related to U.S. Customs and Border Protection (CBP) withhold release orders. The company also produces and provides products for manufactured homes that must comply with performance and construction regulations promulgated by the U.S. Department of Housing and Urban Development. History Patrick Industries, Inc. was founded in 1959. The company was incorporated in Indiana in 1961.